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Coinsilium Group Limited (COIN)
Coinsilium Group Limited: Strategic Business Update
14-Jan-2019 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
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14 January 2019
COINSILIUM GROUP LIMITED
("Coinsilium" or the "Company")
Strategic Business Update
Coinsilium Group (NEX: COIN), the blockchain venture builder, advisor and
investor which manages and finances the development of early stage
blockchain technology companies, today announces a Strategic Business Update
for shareholders, incorporating a review of 2018 activity and an outline of
the Company's plans for 2019.
Eddy Travia, Chief Executive Officer of Coinsilium, commented: "As the
blockchain industry matures, it is starting to attract an increasing number
of well-funded institutions and Coinsilium's track record of identifying
high quality early stage opportunities, such as RSK and Factom, is well
known in the industry.
In 2019, our key priorities will therefore be to clearly demonstrate to the
market the potential we see in the companies within our investment portfolio
and to continue to build-out various new initiatives to take full advantage
of a rapidly expanding blockchain industry.
As a company, Coinsilium is exceptionally well positioned with a robust
financial model and an ability to leverage shareholder returns at an
exciting time in the blockchain industry. However, we recognise the
challenge that the market has in valuing early stage blockchain-based
companies, particularly as there are so few benchmarks. That said, the
sector has seen some remarkable valuation uplifts in relatively short
timescales as companies have proven their viability. Therefore, we will work
to ensure that Coinsilium's market valuation better reflects the value of
our current business and its future potential in 2019.
I trust the information provided in this update will be useful for
shareholders and potential investors, to better understand our current
position and our strategic and operational plans for 2019 and beyond."
Blockchain Investment Environment in 2018
The Company has observed record levels of institutional investment in
blockchain companies over the past twelve months. This echoes a report
published in October 2018 by blockchain research group, Diar, outlining that
Venture Capital investment in blockchain companies was up by 280% so far in
that year. Coinsilium believes that increased interest in the sector has had
a positive effect on the overall valuations of blockchain companies and the
Board therefore looks forward to the next twelve months with confidence.
The Company witnessed the blockchain sector mature significantly in 2018 and
was able to take advantage of a vibrant market at the beginning of the year
through a number of new client acquisitions. Following recent market shifts,
Coinsilium adjusted its criteria for on-boarding new clients, focusing on
businesses for which blockchain technologies are an intrinsic element of
their business models. The Company continued to make good progress and
generate revenue, notwithstanding the slowing of business as a result of
increased regulatory scrutiny of the industry and a downturn in
cryptocurrency and token prices from July 2018.
The Company invested in innovative blockchain-based start-ups and SMEs
within a number of sectors including financial services, fintech and health.
All investees increased their user-base and achieved growth towards their
strategic objectives over the last year.
Coindesk Article:
https://www.coindesk.com/vc-investment-in-blockchain-startups-is-up-280-so-f
ar-this-year [1]
Coinsilium Share Price Review
Over the past year, we have seen a strong correlation between the share
price of Coinsilium and the price of cryptocurrencies. Whilst Coinsilium's
focus has always been on the underlying blockchain technology and not the
cryptocurrencies per se, given that, until recently, a significant
proportion of Coinsilium's advisory revenues and success fees have been
denominated in cryptocurrencies, it is understandable that the market would,
to some degree, see fit to conflate the two.
Over 2018, the price of bitcoin has fallen from US$19k to under US$3.5k and
now sits at circa US$3,600 (at the time of writing). In the short to medium
term, should cryptocurrency market conditions continue to improve,
Coinsilium's share price may well benefit from such market sentiment
alignment. However, our medium to long-term strategic goal remains to
demonstrate the commercial diversity and solidity of Coinsilium as a
business so that, in the future, the share price will more fairly reflect
the company's operational performance and potential, much of which remains
unconnected to cryptocurrency prices.
Investee Highlights in 2018
Indorse [2]
Singapore-based Indorse is a tokenised platform, that scales globally, and
is expressly designed to create a genuine confidence that prospective
employees have the bedrock skills required to perform.
It achieves this by verifying the actual technical skills of individuals on
its platform through validators, interactions with AI chatbots and
assessments by acknowledged experts in their relevant fields. Blockchain
then creates an immutable record of this skills assessment and also provides
the mechanism to reward participants for the value they create to the
platform.
For further information about Indorse, please visit www.indorse.io [2].
Indorse fulfilled successful investment rounds during 2018, raising
SGD450,000 in equity investments and c.US$9m via a token sale. Over 40,000
users signed up to the platform with 96 programmers currently validating and
reviewing code to verify the technical competence of coders.
Indorse fully delivered on its promises for 2018 by creating and running a
working product despite difficult crypto market conditions. The team also
managed to build and rollout an update of their platform in December 2018.
It has customers in the pipeline for 2019 and is expected to achieve
significant revenue growth in the upcoming months.
RSK [3]
RSK Labs is an open source platform adding value to the Bitcoin ecosystem by
enabling the use of smart contracts. RIF Labs uses the RSK Smart Contract
Network for settlement, identity management and economic coordination in a
fully decentralised method. Coinsilium was the lead investor in RSK's first
investment round in February 2016.
For further information about RSK, please visit www.rsk.co [4].
In February 2018, the Company purchased 15,000 series Seed-1 RSK shares in
addition to its previously held 50,000 series Seed-1 RSK shares, making the
total amount invested US$83,750 for a total holding of 65,000 Seed-1 RSK
shares.
On 19 November 2018, the Company announced that RIF Labs had agreed to
acquire the entire share capitals of RSK Labs.
The RIF Labs acquisition was conducted by way of a 'share for token' swap
between RSK Labs shares and RIF tokens and Coinsilium will receive
approximately 1,951,846 RIF tokens over a vesting period in return for its
65,000 RSK shares. The value of the RIF tokens receivable by Coinsilium was
US$773,070 at the prevailing November 2018 Bitcoin/USD rate. Malcolm Palle,
Coinsilium's Executive Chairman, joined the board of RIF Labs in 2018.
RSK Labs is one of Coinsilium's major investments and we look forward to
deepening our ties with RIF Labs and finding mutually beneficial
opportunities for development.
Elevate Health
Elevate Health is building a platform focused on the behavioural health
space, aiming to facilitate a number of cost-reducing solutions for
behavioural healthcare providers, insurers, health authorities, families and
employers. to address problematic and costly lifestyle choices on the part
of their customers, clients, patients, employees and loved ones. Elevate
Health seeks to connect technological innovations such as phone apps,
wearable devices, oracles and smart contracts in order to pay monetary
rewards to motivate lifestyle changes.
For further information about Elevate Health, please visit:
www.elevatehealth.io [5].
Elevate Health has now successfully piloted its platform and the "rewarder"
admin section of the platform and user app went live on the Android Play
Store on 5 January 2019.
Additionally, Elevate Health will go live with its first use case, SOBER,
this month, alongside its partners East Sydney Medical and The Dawn Rehab,
Thailand. SOBER will monitor problem drinkers leaving medical care and
reward them for remaining sober as part of their rehabilitation.
In February 2019, Elevate Health will launch two pilot projects with Aboitiz
Equity Ventures, one of the 10 largest groups in the Philippines and a
Forbes Global 2000 company. It will reward their employees for achieving
lifestyle changes for various lifestyle metrics.
The platform is targeting 100,000 end users by the end of this year, which
would represent an equivalent transactional volume of US$500,000 per day.
StartupToken [6]
StartupToken is a Gibraltar registered hyper-accelerator helping
entrepreneurs in the blockchain space to grow their projects into successful
start-ups. StartupToken helps its clients reach the necessary level of
engagement with their communities worldwide thanks to a full-service package
including legal and technical support, token economics and modelling,
compliance, events organisation and growth hacking.
For further information about StartupToken, please visit
www.startuptoken.com [7].
In November 2017, Coinsilium acquired a 30% holding in StartupToken Ltd, at
a valuation of circa GBP1.2 million, for a consideration of GBP360,905 paid

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January 14, 2019 02:02 ET (07:02 GMT)

through the issue of 3,255,224 Coinsilium shares at 8.5p, and a further cash
payment of GBP84,211.23.
In December 2018, StartupToken announced an inward investment from
Blockwater Capital, a leading digital asset fund (DAF) that focuses on
bringing blockchain-enabled projects to real world application. Blockwater
agreed to acquire 7.4% of StartupToken for a total consideration of
GBP193,548.39, valuing StartupToken at GBP2.6 million and thereby, Coinsilium's
seed capital investment at GBP722,222, an increase of 100% compared to the
cost of Coinsilium's original investment.
For further information about Blockwater Capital, please visit
www.blockwater.io [8].
StartupToken has successfully organised roadshows for its accelerator and
advisory clients in Europe and East Asia, very active regions in terms of
cryptocurrency trading, entrepreneurship and blockchain development and
where StartupToken is building a growing presence.
StartupToken is now working with leading blockchain platforms to help them
in building a solid ecosystem of partners, users and developers.
Bundle [9] Network
Bundle Network is an online platform connected to multiple cryptocurrency
exchanges. Through one single account, users can purchase and sell multiple
coins and tokens within seconds, at the best price available. Bundle Network
aims to provide support for the burgeoning and ever-changing world of
digital assets, easing the transaction process to trade quickly, safely, and
efficiently. Bundle Network aims to release a beta version of its platform
in Q2 2019.
For further information about Bundle, please visit www.bundle.network [10]
In August 2018, Coinsilium announced that it has completed an investment of
US$125,000 in Bundle Network. The valuation terms of Bundle Network, whilst
known to the Company, are subject to confidentiality due to commercial
sensitivities.
Bundle Network has strengthened its collaboration with Istanbul-based
start-up accelerator RDC Smartup, which was established by software
development company RDC Partner. RDC Smartup's co-founder, Mr. Onder Uysal,
has joined the Bundle Network management team in charge of strategy and
business development.
In April 2019, the Bundle Network co-founders will join the Draper
University programme. Draper University is a Silicon Valley-based school for
entrepreneurs founded by Tim Draper. Tim Draper is a renowned venture
capitalist (past investments include Skype and Hotmail) and owns large
holdings of bitcoins.
Coinsilium Strategic Priorities for 2019
As previously stated, in the upcoming year one of our key priorities will be
to demonstrate to the market the quality and potential we see in the
companies within Coinsilium's investment portfolio, and thereby secure
material value recognition for these equity stakes.
In addition to securing the growth of the Company over the short, medium and
long terms, Coinsilium is also working on a number of key initiatives to
expand and diversify its interests in the blockchain sector. Further
information on a number of these areas is provided below.
Seed Accelerator Programs
The key difference between incubators and seed stage accelerator programs is
that incubators do not usually take equity stakes, while seed stage
accelerator programs do. Seed accelerator programs also have a clearly
defined time frame of service provision to start-ups and are ideal for
sourcing new investment opportunities alongside the development of specific
applications for blockchain platforms.
Coinsilium has earned equity stakes in blockchain start-ups in the past for
accelerator-type services, notably via the Block Chain Space programme,
which it ran in 2016. This has enabled the Company to preserve cash while
actively guiding and supporting start-up founding teams.
However, since 2017, Coinsilium has chosen to position itself at a different
level by not directly operating seed accelerator programs, but rather by
investing in companies running these programs, such as StartupToken, in
which the Company acquired a 30% equity stake in November 2017, as outlined
above.
For this reason, going forward, Coinsilium will also be looking to enter
strategic commercial relationships with certain existing and newly
established global seed accelerator programs. Whilst the operational
management of these seed accelerator programs will be handled by third
parties, such as StartupToken, the Company will provide strategic advice
around the structuring and management of investment funds focused on
financing the start-ups.
Coinsilium also plans to expand its B2B accelerator offering to other
regions in 2019. The Company's regional approach will allow it to optimise
revenue streams by choosing to operate in areas that can show the greatest
market growth potential. Stakes in these businesses tend to perform
strongly, as the local management teams are well suited to support the
start-ups in their programs.
Coinsilium will also have the opportunity to make early stage investments in
the accelerated start-ups that it finds to be most promising. The Directors
believe that it can draw significant value from close cooperation with its
portfolio companies such as RSK and StartupToken, whilst helping them to
achieve meaningful benefits and returns.
Advisory Services
In 2018, ICOs (Initial Coin Offerings) came under a high level of scrutiny
from financial regulators worldwide, most notably from the U.S. Securities
and Exchange Commission (SEC). The number of 'Utility Token' offerings and
their average proceeds decreased throughout the year as potential token
issuers and token buyers became increasingly aware of the regulatory risks
surrounding ICOs. This has resulted in many start-ups now switching their
focus away from token sales and towards traditional equity offerings and VC
funding.
Coinsilium's advisory services division is adapting to lower demand in the
utility token space whilst preparing itself for an increasing interest in
Security Token Offerings (STOs) or Digitised 'Smart' Securities. Utilising
Blockchain based smart contract technology, it is now technically possible
for financial instruments such as equities to be represented by tokens. When
compared to Utility Tokens, Security Tokens are likely to be asset-backed
and governed by smart contracts with specific functionalities such as
automated reporting and voting rights.
Unlike Utility token offerings, STO's will be subject to regulation in the
same way as traditional equity offerings and this is a model with which
Coinsilium's management is most familiar.
However, the overall regulatory environment is still evolving and not as yet
entirely clear. The Company is hopeful that these issues will be resolved
through the introduction of new regulatory frameworks and Gibraltar is one
jurisdiction set to implement new Token regulations in 2019.
During 2019, Coinsilium will be increasing its presence in Gibraltar, moving
the management of core operations, such as its advisory services division,
there from London. In addition to identifying Gibraltar as a jurisdiction
providing a higher level of regulatory certainty for blockchain and
cryptocurrency businesses, the objective is also to reduce the costs of
operations, enabling Coinsilium to allocate more resources towards
investments and the provision of revenue generating activities such as its
accelerator and advisory services.
In this regard, in Q1 this year, Coinsilium's Executive Chairman Malcolm
Palle will be relocating to Gibraltar in order to oversee the establishment
of Coinsilium's permanent presence and ongoing operations in the
jurisdiction.
Flowstone Capital
In October 2018, the company announced the establishment of Flowstone
Capital, a new 100%-owned private crypto fund based in Gibraltar.
Coinsilium is currently exploring alternative models to maximise the
shareholder value of Flowstone Capital. As a result of the flexible
structure that the Company utilised, Flowstone Capital required minimal
amounts of Coinsilium management time in 2018. Further updates will be
provided to the market in due course.
TerraStream
Coinsilium's wholly owned, Gibraltar-based subsidiary, TerraStream was
established with the aim to facilitate the application of blockchain
technology for Token based alternative funding solutions with potential
applications across several industry sectors. The initial focus is on the
mining industry and in particular, precious metals and natural resources
extraction.
In light of the prevailing market climate and regulatory challenges of the
past year, Coinsilium decided to revise its development strategy for
TerraStream given its initial focus on asset backed lending. Instead of
launching with a utility token proposition, the Company believes that the
emerging STO or Digital 'Smart' Securities environment will be more
conducive for TerraStream's development, where we see potential
opportunities through the provision of enabling technology solutions.
Further announcements will be made in due course.
Conclusion
The Board of Coinsilium looks forward to providing further updates to the
market across its business in terms of new advisory relationships, broader
commercial initiatives and the specific activities of its material investee
companies. The Company is excited as it enters 2019 to build upon its
current and new activities within an augmenting blockchain and
cryptocurrency market. It is especially enthused as it aims to expand its
B2B accelerator programs and its presence in Gibraltar.
END
For further information, please contact:
Malcolm Palle, Executive Chairman +44 (0) 7785 381089
Coinsilium Group Limited
Eddy Travia, Chief Executive Officer +44 (0) 20 3889 4312
Coinsilium Group Limited
www.coinsilium.com [11]
Guy Miller / Mark Anwyl +44 (0) 207 469 0930
Peterhouse Capital Limited
(NEX Exchange Corporate Adviser)
Nick Emerson +44 (0) 1483 413 500
SI Capital Limited
(Broker)
Notes to Editors:
About Coinsilium